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Abu Dhabi’s Second-Largest Bank Plans $1 Billion Bad Debt Sale

·2 min read

(Bloomberg) --

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Abu Dhabi Commercial Bank PJSC is in talks to sell about $1 billion of bad debt to clean up a balance sheet battered by a series of high-profile corporate defaults.

Codenamed Project Turbo, the emirate’s second-largest lender recently kicked off a process to sell claims of about 4.1 billion dirhams ($1.1 billion) that are mainly secured by personal and corporate guarantees, as well as real estate assets, according to a bank presentation for potential buyers.

The sale aims to accelerate “the de-cluttering of the balance sheet, freeing up scarce management resource,” according to the document. The bank also wants to avoid spending time and money on costly enforcement actions outside the UAE, it said.

A successful deal -- which could be one of the Gulf’s biggest bad debt sales -- would help ADCB to move on from several corporate collapses such as that of hospital group NMC Health Plc, payments firm Finablr Plc and construction company Arabtec Holding. Since lending to these firms, ADCB has been tied up in restructuring talks and has been forced to write down the value of many of the loans.

More Sales

A sale may also prompt other lenders in the United Arab Emirates to consider similar moves if the central bank approves, according to people with knowledge of the matter who asked not to be identified. ADCB is seeking to sign a deal by the end of September, according to the document.

ADCB had to absorb around 6.6 billion dirhams in impairment charges in 2020 and 2021, according to its financial statements. The bank posted a net income of 3.01 billion dirhams in the first half despite booking almost 1 billion dirhams in impairment charges.

ADCB is working with Interpath Advisory, KPMG’s former UK restructuring practice, on the sale, according to the document. Representatives for ADCB and Interpath declined to comment.

Banks in the Gulf region -- like elsewhere -- regularly sell problem debt to specialized funds if they think the potential recovery rate is too low. For distressed debt funds, acquiring a loan book at a steep discount, combined with the any future upside for recoveries, can be a lucrative trade.

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